Date: March 12, 2024 Contact: newsroom@ci.irs.gov WASHINGTON — Roman Sterlingov, a citizen of Russia and Sweden, was found guilty today of operating among the longest-running and most prolific bitcoin money laundering services on the darknet. The jury verdict, in U.S. District Court for the District of Columbia, was announced by U.S. Attorney Matthew M. Graves, Deputy Attorney General Lisa Monaco, Chief Jim Lee of the Internal Revenue Service Criminal Investigation (CI), and FBI Assistant Director in Charge David Sundberg of the Washington Field Office. Sterlingov was found guilty of money laundering conspiracy, sting money laundering, operating an unlicensed money transmitting business, and violations of the D.C. Money Transmitters Act. The jury also granted forfeiture to the government of several specific assets that law enforcement had previously seized, including over about 1,354 Bitcoin held in a Bitcoin Fog wallet, as well as $349,625 and various cryptocurrencies (including Bitcoin, Ethereum, Monero, and Stellar) held in seized Kraken cryptocurrency exchange accounts. U.S. District Court Judge Randolph D. Moss scheduled sentencing for July 15, 2024, and will also consider a further forfeiture money judgment. Money laundering conspiracy and money laundering sting each carry a statutory maximum sentence of 20 years in prison; unlicensed money services business and DC Code money transmission without a license each carry a maximum sentence of five years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. According to the government’s evidence, Sterlingov operated Bitcoin Fog from October 2011 to April 2021. Bitcoin Fog was a cryptocurrency “mixer,” or “tumbler,” and had gained notoriety as a money laundering service for criminals seeking to hide their illicit proceeds from law enforcement. Over the course of its decade-long operation, stopped only when Sterlingov was arrested and detained, Bitcoin Fog moved well over 1.2 million bitcoin (BTC) – valued at approximately nearly $400 million at the time of the transactions. The bulk of that cryptocurrency came from darknet marketplaces and was tied to illegal narcotics, computer fraud and abuse activities, and identity theft. His service also served purveyors of child sexual abuse material (CSAM) through the notorious site Welcome to Video. “Darknet criminals should know by now that operations like Bitcoin Fog cannot provide the anonymity for cryptocurrency transactions that they claim they can,” said U.S. Attorney Matthew M. Graves of the District of Columbia. “This conviction demonstrates that the United States can and will combat the use of technology to carry out crimes in cyberspace.” “Roman Sterlingov thought he could use the shadows of the internet to launder hundreds of millions of dollars in bitcoin without getting caught. But he was wrong,” said Deputy Attorney General Monaco. “Our team of agents, analysts, and prosecutors were relentless in their pursuit of justice, painstakingly tracing bitcoin through the blockchain to hold Sterlingov and his Bitcoin Fog enterprise to account. Today, a jury returned guilty verdicts on all counts — showing that no matter where you operate, if your cryptocurrency service reaches the United States, you must abide by U.S. law.” “Evidence presented at trial clearly showed that the defendant laundered hundreds of millions of illicit funds from the dark web through Bitcoin Fog in an attempt to conceal the origin of those funds,” said IRS Criminal Investigation Chief Jim Lee. “IRS Criminal Investigation special agents are specially equipped to follow the complex financial trail left by criminals, and we are dedicated to holding those accountable for crimes committed.” “For a decade, Sterlingov managed a cryptocurrency mixer that criminals used to launder millions of dollars linked to cybercrimes, narcotics sales, and child exploitation,” said Assistant Director in Charge David Sundberg. “His conviction demonstrates the FBI's commitment to working with our partners to disrupt the cybercriminal ecosystem by targeting its most technical and proficient enablers.” “Roman Sterlingov operated Bitcoin Fog, a cryptocurrency ‘mixing’ service that allowed criminals to launder hundreds of millions of dollars in illicit funds from darknet marketplaces. The defendant and his customers believed they could use Bitcoin Fog to conceal these illicit transactions,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. “As the jury’s guilty verdict shows, that belief was mistaken. The Criminal Division is committed to unmasking and prosecuting those who use technology to hide their crimes, no matter how sophisticated the scheme may be.” At launch, Sterlingov publicized Bitcoin Fog as a tool for anonymizing bitcoin transactions and evading law enforcement. His site charged customers a fee for the service. Historically, the largest users of Bitcoin Fog were darknet markets such as Agora, Silk Road, Silk Road 2.0, Evolution, and AlphaBay. As the jury found, Sterlingov’s mixing and tumbling activity was an illegal money transmitting and money laundering service under federal law. While the identity of a BTC address owner is generally anonymous (unless the owner opts to make the information publicly available), the evidence at trial demonstrated that law enforcement can identify the owner of a particular bitcoin address by analyzing the blockchain. The analysis can also reveal additional addresses controlled by the same individual or entity. IRS-CI’s analysis determined Bitcoin Fog received approximately 486,861.69 BTC, valued at about $54,897,316 at the time of the transactions, directly from darknet markets. Bitcoin Fog sent approximately 164,931.13 BTC (about $23,690,956 at the time of the transactions) directly to darknet markets. In sum, the anonymizer sent or received more than $78 million in transactions involving known darknet markets, counting only direct transactions. Based on Bitcoin Fog’s transaction activity over time, Sterlingov made millions in commissions from Bitcoin Fog transactions. Investigators obtained records of Sterlingov’s true-name accounts at several cryptocurrency exchanges. Analysis of those accounts revealed the vast majority of cryptocurrency deposited into Sterlingov’s accounts was originally sourced and traced back to bitcoin clusters associated with Bitcoin Fog. Under U.S. law, it is a crime to conspire to commit money laundering, that is, to conduct financial transactions with proceeds from unlawful activity designed to conceal the nature, location, source, ownership, or control of such proceeds. It is also a crime to conduct or attempt to conduct a financial transaction involving property represented to be the proceeds of specified unlawful activity, with the intent to conceal the nature, location, source, ownership, or control of such property. It is also a crime to operate a money transmitting businesses without obtaining an appropriate money transmitting license in the state in which the service operates, or with FinCEN. The D.C. also criminalizes similar unlicensed activity. Sterlingov was arrested April 27, 2021, at Los Angeles International Airport and has remained detained since that time. The IRS-CI District of Columbia Cyber Crime Unit and FBI Washington Field Office investigated the case. The Justice Department’s Office of International Affairs and FBI’s Virtual Asset Unit provided invaluable assistance. Additional assistance was provided by Europol; the Swedish Economic Crime Authority (Ekobrottsmyndigheten), the Swedish Prosecution Authority, and the Swedish Police; and the General Inspectorate of Romanian Police, Directorate for Combatting Organized Crime, and the Directorate for Investigating Organized Crime and Terrorism. Trial Attorneys Jeff Pearlman and C. Alden Pelker of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorney Christopher B. Brown for the District of Columbia are prosecuting the case. Pelker and Brown are members of CCIPS’ National Cryptocurrency Enforcement Team (NCET). Paralegal Specialists Angela De Falco and Divya Ramjee provided valuable assistance. CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.
